Rick Holmes: Scoundrels in Washington

Rick Holmes

Tuesday

Sep 30, 2008 at 12:01 AMSep 30, 2008 at 2:01 PM

Last week in this space I revisited Bedford Falls in search of answers about the great bailout of 2008. There was Jimmy Stewart, fending off scared and angry depositors at the Bailey Brothers Building & Loan, explaining that their money wasn't in the vault, but invested in the homes of their neighbors.

Last week in this space I revisited Bedford Falls in search of answers about the great bailout of 2008. There was Jimmy Stewart, fending off scared and angry depositors at the Bailey Brothers Building & Loan, explaining that their money wasn't in the vault, but invested in the homes of their neighbors.

In the updated version, Henry Paulson explains that the $700 billion he needs to rescue the economy isn't in the stuffed pockets and golden parachutes of the Wall Street elite. It's in the inflated value of our houses, in whatever we bought with our home equity loans, in the unpaid balance on our credit cards. Prop up that house of cards, he begs, or it will come crashing down on all of us.

Except that Henry Paulson is no Jimmy Stewart. George W. Bush tried explaining it on primetime TV, but he had that deer-in-the-headlights look and nobody believes a word he says anymore. They couldn't make the case that without dramatic federal action, Wall Street's woes would rattle the finances of every family in Bedford Falls.

So this week brought the reprise of another Frank Capra classic: "Mr. Smith Goes to Washington," the iconic tale of an idealistic westerner - Jimmy Stewart, again - who lands in the Senate and discovers scoundrels and dirty deals in the halls of the Congress.

This time, the climactic scene came on the floor of the House, where the would-be Jefferson Smiths, surrounded by virtual mailbags overflowing with e-mail from angry constituents, railed against the efforts to bail out "New York City fat cats."

Monday's drama had elements of farce. Those were seasoned pols, not naive rookies, denouncing the bailout plan. More than a few of them spent the last 15 years looking the other way while the Wall Street gang rewrote the rules on government oversight.

The scene was steeped in politics, as Republicans and Democrats alike cowered before the uninformed outrage of those showering their in-boxes and phone lines. Three-quarters of them face no serious opposition in November, but you wouldn't know it by their hand-wringing. The Swing State Project estimates just 38 incumbents out of 435 House seats are in "toss-up" or "leaning" races, and 30 of them voted against the bailout.

No one in Washington has any credibility. Not Bush, the most unpopular president ever, who is in the process of adding economic disaster to his legacy of calamities. Not Paulson, the investment banker in charge of rescuing the investment bankers. Not the Congress, which is almost as unpopular as Bush, nor the presidential candidates, neither of them capable of transcending the bare-knuckled partisanship surrounding them.

I used to scoff at the notion that lawmakers had to recess in mid-summer of every election year when there was still work to be done. But asking politicians to make big decisions within weeks of an election, as we saw when Congress authorized war with Iraq in October 2002, is a most dangerous proposition.

The danger here is that markets will crash, credit will dry up and the paralysis on Wall Street will spread to our streets. The stock market crashed in 1929, remember, but it was 1932 before the Great Depression hit its lowest point. Without some strong government action, it could happen again, say those who appear to be the adults in the room.

Or not. Maybe the threat of another depression is as exaggerated as Iraq's weapons of mass destruction. Maybe the wizards of Wall Street are engineering one more Bush-era heist, getting the taxpayers to cover their bad loans by pressuring corporate Republicans and promising help for middle class homeowners to soft-hearted Democrats.

Maybe it will all work itself out over the next few months, with only the irresponsible lenders and borrowers suffering.

But the stock market lost $1.2 trillion of value Monday, taking money out of everyone's retirement accounts. When foreclosures hit your neighborhood, it reduces everyone's home values. When businesses can't get the credit they need to operate, everyone feels the impact.

In Capra's movies, American values triumph and bring happy endings to Bedford Falls and virtue to the halls of Congress. In real life, don't bet on it.

Rick Holmes, opinion editor of the MetroWest Daily News, blogs at Holmes & Co. (http://blogs.townonline.com/holmesandco). He can be reached at rholmes@cnc.com.

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